Business Definition for: analyze
analyze
to evaluate the condition of an accounting-related item and possible reasons for discrepancies. For example, an auditor will analyze the makeup of an expense account to determine whether it is properly stated; has it been charged for proper items that are verified by source documents? Another example: appraising the financial health of a company by analyzing its financial statements as a basis for making investment or credit decisions.
See also
evidence
,
verification
,
examination
Related Terms:
something that provides substantiation of the existence or amount of an item. The third standard of field work for a certified audit requires the auditor to obtain sufficient competent evidential matter as a basis for formulating an opinion on the financial statements. Evidence is more reliable when obtained from an independent source. Further, the stronger the internal control system, the more reliable the evidence. Finally, evidence obtained directly by the auditor through physical examination, observation, computation, and inspection is more persuasive than information obtained indirectly. For example, the accountant needs "backup" to support an entry made in the cash disbursement journal. The cancelled check would serve as that evidence.
process of validating a statement, item, or account. The accountant seeks and examines evidence in support of the item. The auditor also attempts to determine accuracy in the amount of the item by conducting auditing tests and procedures. Sometimes assurance need show only that the characteristic is within a prescribed range.
- audit of a company's financial records.
- review of documents, procedures, and personnel to assure accuracy.
- test administered by a professional organization to measure competencein an area, such as the CPA or CMA examinations.
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